GATX Corporation

Good day, and welcome to the GATX 2021 third quarter conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sherry Hellerman, Director of Investor Relations. Please go ahead, ma'am.

Thank you, David. Good morning, everyone, and thank you for joining GATX's 2021 third quarter earnings call. I'm joined today by Brian Kenney, President and CEO of Tom Ellman, Executive Vice President and CFO, and Bob Lyons, Executive Vice President and President of Rail North America. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2020. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2021 third quarter net income from continuing operations of $40.1 million, or $1.11 per Duluth share. This compares to 2020 third quarter net income from continuing operations of $48.2 million, or $1.36 per diluted share. Year-to-date 2021 net income from continuing operations was $82.1 million or $2.28 per diluted share. This compares to $132.4 million or $3.74 per diluted share for the same period in 2020. The 2021 year-to-date results include a net negative impact of $39.7 million or $1.10 per diluted share related to an enacted tax rate increase in the United Kingdom and a net negative impact of $3.4 million or $0.09 per diluted share attributed to debt extinguishment costs associated with an early redemption. The 2020 third quarter and year-to-date results include a net negative impact of $12.3 million or $0.35 per diluted share related to the elimination of a previously announced tax rate reduction in the United Kingdom. These items are detailed on page 12 of our earnings release. Now, I'll briefly address each segment. The operating environment for Rail North America continued to steadily improve in the third quarter. Rail North America's fleet utilization increased to 99.2% at quarter end, and our renewal success rate was 84%. reflective of the strong execution by our commercial team, as well as gradually improving demand for most car types. For the fifth quarter in a row, absolute lease rates increased from the prior quarter. The third quarter renewal rate change of GATX's lease price index was negative 8.1%, with an average renewal term of 32 months. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We've placed our 8,950 railcars from our 2014 Trinity Supply Agreement and over 2,800 railcars from our 2018 Trinity Supply Agreement. Additionally, we've placed over 6,100 railcars from our 2018 Greenbrier Supply Agreement. Our earliest available scheduled delivery under our supply agreement It's in the second quarter of 2022. The secondary market for rail cars remains active. Rail North America's third quarter remarketing income was $14.6 million, bringing total remarketing income for the year to $63 million. Within Rail International, both GATX Rail Europe and GATX Rail India maintain high fleet utilization at quarter end, as demand for rail cars remain robust. Rail International's investment volume was approximately $41 million during the quarter, as we continue to take delivery of new cars and grow our fleets in Europe and India. However, the pace of fleet growth in both regions this year has been negatively impacted by COVID-19-related delays at rail car manufacturers. The portfolio management segment is performing as expected. The Rolls-Royce and Partners Finance affiliates continue to operate in a challenging environment, as global air passenger volumes remain significantly below 2019 levels. Finally, as noted in the release, we continue to expect 2021 full-year earnings to be in the range of $430 to $450 per diluted share, excluding any impacts from tax adjustments and other items. And those are our prepared remarks. I'll hand it back to David so we can open it up for Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.